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It doesn't even meet the basic definition of a ponzi scheme. This is pure FUD. You might not like it, but that doesn't make it something it is not. There are

It doesn't even meet the basic definition of a ponzi scheme. This is pure FUD. You might not like it, but that doesn't make it something it is not. There are plenty of other things that I would consider a waste of electricity but I am not going to make doing them punishable by hard labor.

arcticbull 5y ago
It's a negative sum wealth redistribution scheme the takes money from new entrants and gives it to miners and to old entrants. The miner portion is what makes it negative-sum. It doesn't meet the traditional definition, no, which is why I referred to it as a "distributed Ponzi scheme" - it's closer to an MLM in classical parlance. [edit] Here's the SEC definition: > A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves. > With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit new investors, or when large numbers of existing investors cash out, these schemes tend to collapse. And here are the red flags that the SEC warns folks to watch for: > High returns with little or no risk. > Unregistered investments. > Unlicensed sellers. > Secretive, complex strategies. [edit2] So with that in mind, it meets many (but not all) of the classic definition elements. 1. All returns are generated by bringing new money into the system. The only way someone can make money on Bitcoin is if a new person invests. That money is then distributed to the earlier participant, net of miner fees. 2. There is no actual business underlying. 3. The constant flow of new money is required to keep the price from collapsing because miners extract something like $50M in welfare from the system per day. 4. The entire space is unregistered investments hawked by unlicensed sellers.
- nightski 5y ago
  Miner fees are paid from transaction fees (since mining is quite literally verifying transactions). You don't lose value for miners being paid.
  - arcticbull 5y ago
    They then have to liquidate the coins to pay for the electricity. This extracts real dollar liquidity from the system and the sell pressure pushes down prices.
- ksml 5y ago
  Based on your phrasing of the SEC definition, the real estate market also feels like it fits the bill :-/ Edit: parent comment was edited, originally said: > It actually matches the SEC definition of a Ponzi scheme haha, which happens to be a little bit less restrictive than a traditional definition. > It's a negative sum wealth redistribution scheme the takes money from new entrants and gives it to miners and to old entrants. The miner portion is what makes it negative-sum.
  - sudosysgen 5y ago
    Can't you rent real estate assets, making it positive sum?
    - imtringued 5y ago
      The building is positive sum like any other investment. Nothing prevents you from building more. Land is zero sum for obvious reasons.
      - arcticbull 5y ago
        Not all investments are positive sum - metals are zero sum, proof of work coins are negative sum. You can’t build a building on top of nothing so if land has a building on it you can apportion some of the productivity of the building to the land itself. Agreed land without improvements is zero sum.
        sudosysgen 5y ago
        I didn't mean for society, I really meant for the investors, and investor in real estate has the option to rent it out so buyers of real estate operate a positive sum business.
      - sudosysgen 5y ago
        I'm not talking about zero sum to society. I mean to investors. Land isn't zero sum because you can rent it out.
- lostmsu 5y ago
  Let's see: "Ponzi scheme is an investment fraud that" "investment fraud" - "induces investors to make purchase or sale decisions on the basis of false information" Major cryptocurrencies do not present "false information", therefore they are not "investment fraud", therefore they are not Ponzi schemes.
  - czl 5y ago
    Cryptocurrency schemes are public but their technology is complex enough (vs their typical participant) that it is not at all necessary to present false information. If anything it is this fact alone makes cryptocurrencies innovative over traditional fraud schemes. No overt deceit required - only average ignorance and gullibility. Being open, decentralized and harder to stop will likely allow them to scale at least a couple orders of magnitude larger before they collapse.
    - lostmsu 5y ago
      That's the thing. If there's no fraud involved, it is not a Ponzi scheme. Merely something we do not fully understand. People might have arguments for or against the collapse of cryptocurrencies, but as with any other poorly understood thing your guess is as good as mine.
      - czl 5y ago
        Any scheme that pays early “investors” with money from new investors will eventually collapse leaving masses who feel they were cheated. When no lies are told yet relevant education or information is held back or obfuscated or buried in pages of legalese or complex computer code - some consider that fraud others not. How will the poor masses that feel about this question? How will they vote?
        lostmsu 5y ago
        > Any scheme that pays early “investors” with money from new investors will eventually collapse leaving masses who feel they were cheated. This statement is obviously false, as there are people born daily. > information .. buried in code .. some consider that fraud It doesn't matter that people consider it fraud. It is not fraud neither by definition, nor it is fraud "in spirit of law" (burying it in code does not have the necessary intention to deceive). You can twist the definition of fraud as much as you want in your mind, but if you do that - you are just a part of ignorant mob with pitchforks.
- imtringued 5y ago
  I personally don't like the term ponzi scheme because it describes deliberate fraud. Bitcoin isn't a ponzi scheme or at least it wasn't built for it. I personally like the term MLM (multi level marketing) because you can do MLM with any product, even products that aren't specifically designed for MLM. It's just that cryptocurrencies lend themselves especially well to MLM.
  - deleted 5y ago
    [deleted]

arcticbull 5y ago

It's a negative sum wealth redistribution scheme the takes money from new entrants and gives it to miners and to old entrants. The miner portion is what makes it negative-sum. It doesn't meet the traditional definition, no, which is why I referred to it as a "distributed Ponzi scheme" - it's closer to an MLM in classical parlance. [edit] Here's the SEC definition: > A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves. > With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit new investors, or when large numbers of existing investors cash out, these schemes tend to collapse. And here are the red flags that the SEC warns folks to watch for: > High returns with little or no risk. > Unregistered investments. > Unlicensed sellers. > Secretive, complex strategies. [edit2] So with that in mind, it meets many (but not all) of the classic definition elements. 1. All returns are generated by bringing new money into the system. The only way someone can make money on Bitcoin is if a new person invests. That money is then distributed to the earlier participant, net of miner fees. 2. There is no actual business underlying. 3. The constant flow of new money is required to keep the price from collapsing because miners extract something like $50M in welfare from the system per day. 4. The entire space is unregistered investments hawked by unlicensed sellers.

nightski 5y ago
Miner fees are paid from transaction fees (since mining is quite literally verifying transactions). You don't lose value for miners being paid.
- arcticbull 5y ago
  They then have to liquidate the coins to pay for the electricity. This extracts real dollar liquidity from the system and the sell pressure pushes down prices.
ksml 5y ago
Based on your phrasing of the SEC definition, the real estate market also feels like it fits the bill :-/ Edit: parent comment was edited, originally said: > It actually matches the SEC definition of a Ponzi scheme haha, which happens to be a little bit less restrictive than a traditional definition. > It's a negative sum wealth redistribution scheme the takes money from new entrants and gives it to miners and to old entrants. The miner portion is what makes it negative-sum.
- sudosysgen 5y ago
  Can't you rent real estate assets, making it positive sum?
  - imtringued 5y ago
    The building is positive sum like any other investment. Nothing prevents you from building more. Land is zero sum for obvious reasons.
    - arcticbull 5y ago
      Not all investments are positive sum - metals are zero sum, proof of work coins are negative sum. You can’t build a building on top of nothing so if land has a building on it you can apportion some of the productivity of the building to the land itself. Agreed land without improvements is zero sum.
      - sudosysgen 5y ago
        I didn't mean for society, I really meant for the investors, and investor in real estate has the option to rent it out so buyers of real estate operate a positive sum business.
    - sudosysgen 5y ago
      I'm not talking about zero sum to society. I mean to investors. Land isn't zero sum because you can rent it out.
lostmsu 5y ago
Let's see: "Ponzi scheme is an investment fraud that" "investment fraud" - "induces investors to make purchase or sale decisions on the basis of false information" Major cryptocurrencies do not present "false information", therefore they are not "investment fraud", therefore they are not Ponzi schemes.
- czl 5y ago
  Cryptocurrency schemes are public but their technology is complex enough (vs their typical participant) that it is not at all necessary to present false information. If anything it is this fact alone makes cryptocurrencies innovative over traditional fraud schemes. No overt deceit required - only average ignorance and gullibility. Being open, decentralized and harder to stop will likely allow them to scale at least a couple orders of magnitude larger before they collapse.
  - lostmsu 5y ago
    That's the thing. If there's no fraud involved, it is not a Ponzi scheme. Merely something we do not fully understand. People might have arguments for or against the collapse of cryptocurrencies, but as with any other poorly understood thing your guess is as good as mine.
    - czl 5y ago
      Any scheme that pays early “investors” with money from new investors will eventually collapse leaving masses who feel they were cheated. When no lies are told yet relevant education or information is held back or obfuscated or buried in pages of legalese or complex computer code - some consider that fraud others not. How will the poor masses that feel about this question? How will they vote?
      - lostmsu 5y ago
        > Any scheme that pays early “investors” with money from new investors will eventually collapse leaving masses who feel they were cheated. This statement is obviously false, as there are people born daily. > information .. buried in code .. some consider that fraud It doesn't matter that people consider it fraud. It is not fraud neither by definition, nor it is fraud "in spirit of law" (burying it in code does not have the necessary intention to deceive). You can twist the definition of fraud as much as you want in your mind, but if you do that - you are just a part of ignorant mob with pitchforks.
imtringued 5y ago
I personally don't like the term ponzi scheme because it describes deliberate fraud. Bitcoin isn't a ponzi scheme or at least it wasn't built for it. I personally like the term MLM (multi level marketing) because you can do MLM with any product, even products that aren't specifically designed for MLM. It's just that cryptocurrencies lend themselves especially well to MLM.
- deleted 5y ago
  [deleted]